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Sri Lanka ranked among countries worst hit by COVID-19

Sri Lanka’s economy is among the worst affected by the COVID-19 crisis, according to London-based publication ‘The Economist’. The financial paper which ranked 66 countries that are relatively safe and are in distress based on four potential sources of peril including public debt, public and private foreign debt, borrowing cost and reserve cover, ranked Sri Lanka at 61, with it only being better than Angola, Bahrain, Zambia, Lebanon and Venezuela. Botswana tops the list of countries with the strength of its indicators followed by Taiwan. In South Asia, Bangladesh has been listed as the 9th strongest economy and has fared better than three of its South Asian neighbours — India (18th), Pakistan (43) and Sri Lanka. According to The Economist, Russia, Peru, and the Philippines look relatively robust while 30 are in distress or flirting with it including Sri Lanka. “COVID-19 hurts emerging economies by locking down their population, damaging their export earnings, and deterring foreign capital,” The Economist said. According to the International Monetary Fund (IMF), emerging economies would need at least $2.5 trillion to weather the health crisis. It said 66 economies need to find over $4 trillion to service their foreign debt and cover any current account deficits. According to the publication, Covid-19 hurts emerging economies in at least three ways: by locking down their populations, damaging their export earnings and deterring foreign capital. “Even if the pandemic fades in the second half of the year, gdp in developing countries, measured at purchasing-power parity, will be 6.6% smaller in 2020 than the IMF had forecast in October,” it said. Moreover, it predicts, that The damage to exports will be acute. Thanks to low oil prices, Gulf oil exporters will suffer a current-account deficit of over 3% of gdp this year, the imf reckons, compared with a 5.6% surplus last year. When exports fall short of imports, countries typically bridge the gap by borrowing from abroad. But the reversal of capital inflows has been matched by higher borrowing costs. To weather the crisis, the report states, emerging economies may need at least $2.5trn, the fund reckons, from foreign sources or their own reserves. One way to ensure countries have more hard currency is to stop taking it from them. The g20 group of governments has said it will refrain from collecting payments this year on its loans to the poorest 77 countries (though the borrowers will have to make up the difference later). The g7 group of countries has urged private lenders to show forbearance too. A group of over 70 private creditors supports the idea, while noting its “complexity” and the “constraints” lenders face. A sweeping debt standstill may also be less necessary than it seemed even two weeks ago, as investors have calmed somewhat. That may reflect over-optimism about the course of the pandemic. But even false optimism can be of true help to emerging markets, by allowing them to refinance debt on affordable terms.